RBI Governor Urijit Patel to present maiden monetary policy today

Reserve Bank of India (RBI) Governor Urijit Patel is all set to present his maiden monetary policy today.

The newly-constituted Monetary Policy Committee (MPC) started its first meeting yesterday to fix the benchmark interest rate, with experts saying that RBI may opt for status quo and wait for further easing of inflation.

The 6-member panel headed by RBI Governor Urjit Patel began its two-day deliberations to consider various factors like inflation, credit offtake and the need to propel growth, foreign trade and global economic factors.

Moving away from the usual practice of announcement at 11 am, the fourth bi-monthly monetary policy review would be made public at 2:30 pm after the MPC meeting.

Experts are of the opinion that given the price situation, panel is expected to keep rates unchanged to meet the targeted inflation of 4 percent with the margin of 2 percent on either side.

August retail inflation eased to a 5-month low of 5.05 percent but WPI inflation climbed to a two-year high of 3.74 percent. Before the dip in August, both the retail as well as wholesale price indices were on a continuous upward spiral.

The government had in August notified 4 percent inflation target with a range of plus/minus 2 percent for the next five years under the monetary policy framework agreement with the Reserve Bank.

Patel was the one who wrote the inflation targeting path for RBI when he was deputy to former Governor Rajan, and analysts say it is unlikely that he will jettison his guard on price rise, especially under the new inflation targeting framework.

The government last week named three academics from the country`s top institutions as its nominees. They are Chetan Ghate, Professor at the Indian Statistical Institute; Pami Dua, Director at Delhi School of Economics; and Ravindra Dholakia, Professor at the Indian Institute of Management, Ahmedabad.

The elevation of Patel has raised expectations among those who were critical of then Governor Raghuram Rajan for not easing enough the monetary policy by cutting rates, though his moorings are as monetarist as his predecessor and he is considered to attach the same importance to inflation control.

His views on monetary policy were expressed at the time Rajan held rates in the February 2015 review after making an unexpected rate cut a month earlier — the first in nearly two years — as he elaborated on the “important backdrop” to the move, citing the trend of accommodative monetary policies being adopted by developed economies.